Energy watchdog wants $40 power price cut

Camera IconConsumer prices are all that matter in the energy debate, Malcolm Turnbull says.

The energy watchdog wants power companies to cut up to $40 a year from bills, as Labor argues they must also show why an energy royal commission isn't necessary.

Coalition backbench MPs and the Greens are pressuring the government for a major inquiry into the energy industry, which has seen prices skyrocket for households and businesses.

Labor is yet to formally consider whether it wants to hold a royal commission.

"It's up to the companies and the government to show a royal commission isn't necessary," Labor frontbencher Jim Chalmers told Sky News on Monday.

The Australian Energy Regulator on Tuesday released its draft guidelines for the rate of return companies can expect from their energy investments.

"If the rate of return is too high, over-investment could follow and customers pay more than necessary. If it is too low insufficient investment may result, risking reliability," AER chair Paula Conboy said on Tuesday.

Companies have 50 days to respond to the new draft guidelines.

"If implemented, this draft guideline could result in household customers' bills decreasing by around $30 to $40 per year," Ms Conboy said.

Cutting prices is the aim of the coalition's national energy guarantee policy, which is causing tension within the Liberal and National party rooms.

Prime Minister Malcolm Turnbull has rejected calls for an energy royal commission, promising an "illuminating" Australian Competition and Consumer Commission report will be released this week.

Assistant minister Zed Seselja said he would wait and see if a another inquiry was necessary after the ACCC's findings.

"The type of inquiry is not something I'd get hung up on. What I want to see is maximum pressure put on (retailers)," Senator Seselja told Sky News.

He's confident Mr Turnbull and Energy Minister Josh Frydenberg will get enough internal support to get the government's energy plan through the partyroom.

The Electrical Trades Union said report after report showed the Australian energy market was failing customers.

"All of these reports continue to show us the laws that created this fabricated electricity market are a complete failure," national secretary Allen Hicks said.

"It's unnecessarily complicated but deliberately so, so corporate interests can hide their profiteering."